Understanding

Human Well-being

e d i t e d b y
Mark McGillivray
a n d
Matthew Clarke
Understanding human well-being
Edited by Mark McGillivray and Matthew Clarke

a United Nations
University Press
TOKYO u NEW YORK u PARIS
Contents

List of figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii

List of tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x

List of contributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv

Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix
Anthony Shorrocks

Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxi

List of acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxii

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1 Human well-being: Concepts and measures . . . . . . . . . . . . . . . . . . . . . 3

Mark McGillivray and Matthew Clarke

Part I: Human well-being concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

2 Does it matter that we do not agree on the definition of

poverty? A comparison of four approaches . . . . . . . . . . . . . . . . . . . . . . 19
Caterina Ruggeri Laderchi, Ruhi Saith and Frances Stewart
vi CONTENTS

3 Economic well-being and non-economic well-being . . . . . . . . . . . . . 54

Andrew Sumner

4 The four qualities of life: Ordering concepts and measures of

the good life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Ruut Veenhoven

5 Inequalities, agency and well-being: Conceptual linkages and

measurement challenges in development . . . . . . . . . . . . . . . . . . . . . . . . 101
Douglas A. Hicks

Part II: Well-being measures and applications . . . . . . . . . . . . . . . . . . . . . . 117

6 On the measurement of human well-being: Fuzzy-set theory

and Sen’s capability approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Mina Baliamoune-Lutz

7 Benchmarking sustainable development: A synthetic

meta-index approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Laurens Cherchye and Timo Kuosmanen

8 Adjusting human well-being indices for gender disparity:

Insightful empirically? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
Mark McGillivray and J. Ram Pillarisetti

9 Well-being and the complexity of poverty: A subjective

well-being approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
Mariano Rojas

10 International inequality in human development dimensions . . . . 207

Mark McGillivray

11 Assessing well-being using hierarchical needs . . . . . . . . . . . . . . . . . . . 217

Matthew Clarke

12 Assessing poverty and inequality at a detailed regional level:

New advances in spatial microsimulation . . . . . . . . . . . . . . . . . . . . . . . . 239
Ann Harding, Rachel Lloyd, Anthea Bill and Anthony King

Part III: Well-being case studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263

13 Longevity in Russia’s regions: Do poverty and low public

health spending kill? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265
Oleksiy Ivaschenko
 CONTENTS vii

14 The medium- and long-term effects of an expansion of

education on poverty in Côte d’Ivoire: A dynamic
microsimulation study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298
Michael Grimm

15 Dynamics of poverty in Ethiopia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326

Arne Bigsten and Abebe Shimeles

16 Prospects for ‘‘pro-poor’’ growth in Africa . . . . . . . . . . . . . . . . . . . . . . 353

Arne Bigsten and Abebe Shimeles

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377
Introduction
1
Human well-being:
Concepts and measures
Mark McGillivray and Matthew Clarke

Introduction

Understanding human well-being is a core task for both researchers and

policy-makers. Determining whether human well-being has improved
over time is of crucial importance, particularly with more than 1 billion
people living on less than $1 a day. It is the central challenge for monitor-
ing progress towards the Millennium Development Goals (MDGs),
adopted by the international community at the UN Millennium Summit
in September 2000. Among the many MDGs are halving, between 1990
and 2015, the proportion of people living in conditions of extreme in-
come poverty and ensuring by 2015 that all children will be able to com-
plete a full course of primary education (UN Millennium Project Report,
2005).
Human well-being, however, is an ambiguous concept. It lacks a uni-
versally acceptable definition and has numerous, and often competing, in-
terpretations. As human well-being cannot be directly observed, it cannot
be directly measured. Further, terms such as quality of life, welfare, well-
living, living standards, utility, life satisfaction, prosperity, needs fulfil-
ment, development, empowerment, capability expansion, human devel-
opment, poverty, human poverty, land and, more recently, happiness are
often used interchangeably with well-being without explicit discussion as
to their distinctiveness.
Conceptualization of human well-being has evolved over time. Its
multidimensional nature is now commonplace in discussion, yet in only
3
4 McGILLIVRAY AND CLARKE

recent times human well-being was considered analogous with income

and consumption levels. Much of this shift reflects Sen’s (1985, 1987a,
1987b) work on capabilities and functionings, and other work such as
Nussbaum’s (1988, 1992, 2000) central human capabilities, Doyal and
Gough’s (1991) intermediate human needs and Narayan et al.’s (2000)
axiological needs, among many others. Subsequently, approaches to
measuring human well-being have widened to incorporate these non-
economic aspects. Issues such as gender and sustainability have also be-
come increasingly integrated within human well-being analysis.
Given this evolution, it would seem incongruous that the most common
measure of human well-being is still income. Income allows individuals
(and nations at the aggregate level) to increase consumption, and con-
sumption increases utility. However, little agreement exists within the lit-
erature on how consumption might represent human well-being. Well-
being has been defined as a direct function of consumption (McKenzie,
1983; Slesnick, 1998), particularly in areas of great poverty (Hueting,
1980), as a function of consumption and the environment (Islam, 1998),
as a function of consumer surplus (Johnson, 1996), as a function of con-
sumption weighted by probability of survival (Nordhaus, 1998) and as
marginal propensity to consume (Islam, 2000). Yet the limitations of
income-based (or consumption-based) measures of human well-being
are well known, including limitations around equity, environment and its
own construction (see Clarke and Islam, 2004, for a summary).
Despite these weaknesses. though, income ‘‘continues to be regarded
as the ‘quintessential’ well-being indicator’’ (Dasgupta, 2001: 53). One
suspects that a major reason for this is data availability and reliability.
Composite indicators, such as the human development index (HDI)
(UNDP, 1990) and its forerunner, the physical quality of life index (Mor-
ris, 1979), were designed to challenge the hegemony of income as the
representative measure of human well-being and overcome these weak-
nesses. The HDI is a function of life expectancy, adult literacy, school en-
rolments and GDP per capita. Its purpose is to extend consideration of
human development of well-being away from the economic-centric na-
ture suggested when simply using income.
Existing largely in parallel with the aforementioned objective consider-
ations of human well-being is research on subjective well-being (or happi-
ness). Subjective well-being involves a multidimensional evaluation of
life, including cognitive judgements of life satisfaction and affective eval-
uations of emotions and moods (Diener, 1984; Argyle, 1987; Diener and
Larsen, 1993; Eid and Diener, 2003). Three decades ago Easterlin (1974)
examined links between income and happiness and found that while indi-
viduals with higher incomes were happier than those with lower incomes
at a particular point in time, the happiness of a particular cohort did not
 WELL-BEING CONCEPTS AND MEASURES 5

increase with income over time. Happiness levels actually remained con-
stant despite large increases in income. Cummins (1998) has proposed
a theory of subjective well-being homeostasis, in which happiness is
actively controlled and maintained by a set of psychological devices that
function under the control of personality. While good or bad events will
cause a short-term change in subjective well-being, these psychological
devices will return human well-being to previous levels. Such adaptation
resulting in this stagnant trend line poses serious difficulties for public
policy-makers interested in improving human well-being over time.
Integrating well-being and sustainability measures has long existed
within the literature (Sametz, 1968; Nordhaus and Tobin, 1973; Zolotas,
1981). Anand and Sen (2000) view sustainability as a concern for inter-
generational equity. One approach integrating sustainability measure-
ment into human well-being measures is the genuine progress index
(GPI) (Daly and Cobb, 1990). The GPI is a monetary-based index that
has been designed to ascertain the impact of a growing economy on sus-
tainable well-being. It comprises a large number of individual benefit and
cost items that account for these wide-ranging impacts of economic
growth, including social and environmental benefits of costs as well as
the standard economic variety. Therefore, whilst the GPI embraces
some national accounting values, its full calculation depends on a number
of other values that normally escape market valuation. Such attempts to
adjust well-being indices using sustainability measures are not without
criticism (Neumayer, 1999).
Regardless of the measurement approach selected, gender must be an
important consideration in both conceptualizing and measuring human
well-being. Yet much of the work in the literature fails to include gender
analysis explicitly. The major difficulty, though, is that gender-adjusted
measures are subject to the same criticisms as the variables on which
they are based (Klasen, 2004). Further, gender-adjusted indicators tend
to be very highly rank-correlated with their non-specific or non-adjusted
counterparts, and with other well-being indicators, including income per
capita. This is not of course an argument against using gender-specific or
gender-adjusted indicators, merely one for improving their accuracy and
comparability.
Given such an array of conceptualizations and approaches to measure-
ment, how can one adequately make sense of human well-being? Various
data are now widely published, often for large country samples. The
UNDP, in its Human Development Report 2004, publishes data on life ex-
pectancy, adult literacy and school enrolment ratios for 177 countries; the
World Development Indicators (World Bank, 2005) contains around 800
indicators for over 150 countries; and the World Happiness Database
(Veenhoven, 2004) contains 2,300 surveys in 112 nations, dating from
6 McGILLIVRAY AND CLARKE

1946 to the present. Concerns remain, however, about the reliability and
comparability of many of these indicators. Most of the widely used social
indicators are based on information obtained from national censuses. Yet
many countries, especially the poorest, do not have the resources to con-
duct accurate censuses. No country conducts a yearly national census and
some countries conduct them at irregular intervals. Data for the interven-
ing years have to be estimated. Given these and a number of method-
ological problems, the data tend to be incomparable both between coun-
tries at a given point in time and within given countries over time; data
can therefore be difficult to interpret, especially if a number of indicators
of human well-being (such as in the MDGs) are being considered. But
the compelling need to understand human well-being requires the use of
these indicators, despite these weaknesses, as well as continuously im-
proving both the conceptualization and the empirical estimation of hu-
man well-being.

Volume orientation and contents

Despite all these clear and obvious difficulties in assessing human well-
being, this task is crucial. Improving human well-being, especially of the
poor, must be and remain a central task for all public policy-makers.
Even if the concept can be directly observed and metrically measured, at-
tempts to assess public policy against this test of improving well-being are
required. We now know more about human well-being and the related
concepts of poverty and inequality than ever before, as a result of con-
ceptual and methodological advances and better data. Yet despite this
progress, the vitality of underlying concepts and the quality of data are
repeatedly challenged and there remains much to be desired, particularly
with regard to the world’s poorest countries.
This book looks at advances in underlying well-being concepts and cor-
responding empirical measures and highly various analytical approaches.
Its orientation is largely consistent with the view that well-being is multi-
dimensional. Identifying an exhaustive list of dimensions is no easy task.
Getting general agreement on the list and the relative importance of each
component would appear to be an impossible one. It follows that identi-
fying an exhaustive list of measures that all could agree on is also an im-
possible task. But there would appear to be general agreement that this
list would include measures of health, education and income. Income is
the most contentious of these variables, and many will argue that it is
the least important. But it would appear to be difficult to argue that it
is irrelevant and that it should be ignored altogether in the assessment
and analysis of achieved well-being. The international community cer-
 WELL-BEING CONCEPTS AND MEASURES 7

tainly does not subscribe to this view, given that reducing income poverty
has been included among the MDGs.
The book therefore examines traditional monetary concepts and mea-
surements along with concepts and measures in non-income spheres, in-
cluding educational achievement, longevity, health and self-assessed or
subjective well-being. Among the measures examined are the indices
produced by the UNDP, including the well-known HDI, one of many
non-exclusively monetary measures that have done much to refocus at-
tention on the importance of non-monetary measures of human well-
being.
Some of the book’s chapters are purely conceptual, some are empirical
and others a mix of the two. Some chapters review pre-existing concepts
and measures, with a view of future developments, while others propose
new measures or adjustments to pre-existing ones. Others provide case-
study material relating to a mix of developing, transitional or developed
countries.
This book is divided into three parts. Part I contains four chapters,
each focusing on human well-being concepts. The seven chapters in part
II provide various measures and empirical applications of human well-
being, while part III includes four human well-being case studies.
Chapter 2 by Caterina Ruggeri Laderchi, Ruhi Saith and Frances Stew-
art asks whether it is important for general agreement around definitions
of poverty to exist within the literature. While there is worldwide agree-
ment on poverty reduction as an overriding goal of development policy,
there is little agreement on the definition of poverty. Four approaches to
the definition and measurement of poverty are reviewed in this chapter:
the monetary, capability, social exclusion and participatory approaches.
The theoretical underpinnings of the various measures and problems of
operationalizing them are pointed out. The authors argue that each is a
construction of reality, involving numerous judgements which are often
not transparent. The different methods have different implications for
policy, and also, to the extent that they point to different people as being
poor, for targeting.
Andrew Sumner discusses the measurement of poverty and well-being
in chapter 3. He provides a historical overview of the last 50 years. This is
followed by discussion of three groupings of indicators: those measures
based primarily on economic well-being, those based on non-economic
well-being and composite indicators. Sumner argues that the choice of in-
dicator should reflect its purpose and that economic measures are best
when quick, rough-and-ready, short-run, aggregate inferences are re-
quired. In contrast, non-economic measures are better when greater
depth regarding medium- or longer-term trends and/or disaggregation
are required.
8 McGILLIVRAY AND CLARKE

Human well-being is conceptualized as four simultaneous qualities of

life by Ruut Veenhoven in chapter 4. The terms ‘‘quality of life’’, ‘‘well-
being’’ and ‘‘happiness’’ denote different meanings; sometimes they are
used as an umbrella term for all of value, and at other times to denote
special merits. This chapter is about the specific meanings of the terms.
It proposes a classification based on two bi-partitions; between life
‘‘chances’’ and life ‘‘results’’, and between ‘‘outer’’ and ‘‘inner’’ qualities.
Together these dichotomies imply four qualities of life: liveability of the
environment, life-ability of the individual, external utility of life and inner
appreciation of life. This fourfold matrix can be applied in three ways:
first to place related notions and alternative classifications, second to ex-
plore substantive meanings in various measures for quality of life and
third to find out whether quality of life can be measured comprehensively.
The final chapter in part I, by Douglas A. Hicks, is concerned with in-
equalities, agency and well-being. Sen’s (1985, 1987a, 1987b) capabilities
approach has emphasized that inequalities can be analysed in various di-
mensions of human functioning. Indicators of these inequalities can be
incorporated into assessments of well-being. The capabilities approach
also highlights the intrinsic importance of agency and demonstrates em-
pirically that agency is instrumentally valuable for achieving various
functionings. This chapter draws together these discussions to delineate
the relationships among inequalities, agency and well-being of disad-
vantaged persons. Relative deprivation (e.g. being illiterate or being in
ill health) negatively affects a person’s well-being and contributes to a
lack of agency. Conversely, some (but not all) expressions of agency by
disadvantaged persons can help reduce inequalities. This model pro-
vides a complex understanding of the dynamics of deprivation – and its
alleviation.
In the first chapter of part II, Mina Baliamoune-Lutz introduces a
fuzzy-set theory approach to measurement of human well-being.
Baliamoune-Lutz suggests that Sen’s (1985, 1987a, 1987b) influential
work on human development has led economists to explore new areas
that have become increasingly important for human well-being. In partic-
ular, Sen emphasizes the importance of the ‘‘freedom to choose’’. Free-
dom, however, is not always an exact (crisp) outcome, and membership
in the freedom space can take place gradually. This chapter proposes a
framework that uses fuzzy-set theory to measure human well-being con-
sistent with Sen’s capability approach.
The need for monitoring countries’ overall performance in sustainable
development is discussed by Laurens Cherchye and Timo Kuosmanen in
chapter 7. While the need for sustainable development is widely recog-
nized, the methods for aggregating vast amounts of empirical data remain
rather crude. This chapter examines the so-called ‘‘benefit-of-the-doubt’’
 WELL-BEING CONCEPTS AND MEASURES 9

weighting method as a tool for identifying benchmarks without imposing

strong normative judgement about sustainable development priorities.
The weighting method involves linear optimization techniques, and al-
lows countries to emphasize and prioritize those sustainable development
aspects in which they perform relatively well. Using this method, Cher-
chye and Kuosmanen construct a meta-index of sustainable development
(MISD), which combines 14 existing aggregate sustainable development
indices (developed by well-established organizations and/or expert
teams) into a single synthesizing overall sustainable development index.
Within a sample of 154 countries, this index identifies 6 benchmark coun-
tries (3 high-income countries and 3 upper-middle-income countries), but
also a number of seriously underperforming countries. They view this
approach as a first step towards more systematic international compari-
sons aimed at facilitating diffusion of the best practices and policies from
the benchmark countries to the less developed world.
Chapter 8, by Mark McGillivray and J. Ram Pillarisetti, looks at the is-
sue of adjusting well-being indicators for gender disparities. It is specifi-
cally concerned with the gender-related development index (GDI) and
gender empowerment measure (GEM), composite indicators initially
proposed by the UNDP in its Human Development Report 1995. It con-
siders the extent to which these indices provide insights, with respect to
country rankings, which pre-existing, non-gender-specific development
indicators cannot provide. The latter indicators are PPP GDP per capita
and the HDI.
Chapter 9, by Mariano Rojas, investigates human well-being from a
subjective well-being approach. Using a Mexican database, Rojas shows
that there is a weak relationship between subjective well-being and indi-
cators of well-being such as income and consumption. Therefore, subjec-
tive well-being provides additional useful information to study human
well-being and, in consequence, poverty. Three reasons for the existence
of a weak relationship are studied: first, the fact that a person is much
more than a consumer; second, the role of heterogeneity in human per-
ceptions; and third, the existence of heterogeneity in purposes of life.
Rojas argues that understanding and reducing poverty would be better
served by a concept of human well-being which incorporates subjective
well-being indicators and is based on the wholeness and complexity of
human beings.
International inequality in well-being is examined by Mark McGilliv-
ray in chapter 10. Inter-country inequality in per capita income has been
extensively researched over many decades. The literature on this topic is
vast. A smaller but steadily growing number of studies have examined in-
equality among countries in multidimensional well-being. Most of these
studies have looked at inequality in the HDI. Chapter 10 contributes to
10 McGILLIVRAY AND CLARKE

this literature. It examines HDI inequality among more than 170 coun-
tries over the period 1997–2002 using a number of different inequality
measures. Unlike previous studies, McGillivray also looks at inequality
in each of the HDI’s components and PPP GDP per capita, asking
whether they tell more of a story with respect to inequality than the index
as a whole.
Matthew Clarke applies a hierarchical approach to measuring human
well-being to eight South-East Asian countries in chapter 11. This hierar-
chical approach is underpinned by a rigorous psychological theory of
human motivation (Maslow, 1970). Hierarchical human needs are classi-
fied into five categories: basic, safety, belonging, self-esteem and self-
actualization. Within this chapter well-being is defined as a function of
the extent to which society facilitates the attainment or fulfilment of the
ultimate hierarchical need: self-actualization. Clarke operationalizes this
approach by identifying outcomes and indicators that represent or corre-
spond to the four lower levels of needs upon which the achievement of
self-actualization is predicated. Eight indicators have been chosen to re-
flect these four hierarchical categories. A composite indicator of these
eight indicators is calculated using an approach similar to that of the
HDI. Weights are also assigned to the different levels within this hierar-
chy to reflect the shift from minimally adequate standards to higher levels
of well-being within nations. The countries surveyed for the period 1985–
2000 are Cambodia, Indonesia, Lao PDR, Malaysia, the Philippines,
Singapore, Thailand and Viet Nam. Results for Australia are also pro-
vided as a comparative benchmark.
The Australian experience is discussed in chapter 12 by Ann Harding,
Rachel Lloyd, Anthea Bill and Anthony King. In recent years new spa-
tial microsimulation techniques, involving the creation of synthetic data
about the socio-economic characteristics of households at a detailed re-
gional level, have been developed. The data are potentially available at
any level of geographic aggregation, down to the level of the census col-
lection district within Australia (about 200 households). This chapter
describes the results of initial attempts to link the new database to an ex-
isting static microsimulation model of taxes and transfers in Australia, so
that the spatial impact upon poverty and inequality of possible policy
changes can be assessed. This chapter then outlines the new techniques
used to create the synthetic household microdata and demonstrates how
they can be used to analyse poverty rates, the spatial impact of possible
policy change and the characteristics of the poor by geographic area.
Four case studies of human well-being are presented in part III. A
number of these case studies look at income measures, in part due to
reasons of data availability. In chapter 13 Oleksiy Ivaschenko discusses
longevity in the regions of Russia, examining the impact of changes in
 WELL-BEING CONCEPTS AND MEASURES 11

poverty and public health spending on intertemporal variations in lon-

gevity using a unique regional-level dataset that covers 77 regions of
Russia over the period 1994–2000. A dynamic panel data model is used
as a tool for the empirical analysis. The model is estimated using the
Arellano-Bond dynamic panel data estimator.
Michael Grimm uses a dynamic microsimulation model to analyse the
distributional effects of an expansion of education in Côte d’Ivoire in the
medium and long term in chapter 14. The simulations are performed in
order to replicate several policies in force or subject to debate in this
country. Various hypotheses concerning the evolution of returns to edu-
cation and labour demand are tested. The direct effects between educa-
tion and income as well as the different transmission channels, such as oc-
cupational choices, fertility and household composition, are analysed.
Chapter 15, by Arne Bigsten and Abebe Shimeles, addresses issues re-
lated to the dynamics of income poverty using unique household panel
data for urban and rural areas of Ethiopia for the period 1994–1997.
Household characteristics that are correlated with the incidence of
chronic poverty as well as vulnerability to poverty are highlighted. In
chapter 16 they discuss which poverty reduction strategies are appropri-
ate in rural areas compared to urban areas. Bigsten and Shimeles also
discuss prospects for ‘‘pro-poor’’ growth in Africa. They examine trends
in income distribution and its linkages to economic growth and poverty
reduction in order to understand the prospects for achieving poverty
reduction in Africa. They then examine the levels and trends in income
distribution in some African countries and calculate pro-poor growth in-
dices. Different growth patterns are simulated for Ethiopia, Mozambique,
South Africa and Uganda.

Key conclusions
The chapters in this book provide a number of insights which will be use-
ful to both researchers and policy-makers. Within part I, Ruggeri Lader-
chi, Saith and Stewart conclude that the definition of poverty does matter
for poverty eradication strategies. Sumner’s review of the literature high-
lights that whilst conceptualization of human well-being is very rich,
its empirical operationalization is still lagging behind. He notes this is
largely a function of data and suggests that a suite of measures would be
a better way of assessing improvements in human well-being. The conclu-
sion reached by Veenhoven is that whilst it is better to distinguish four
distinct life qualities rather than quality of life, it is not possible, nor
does it makes sense, to try to aggregate these qualities in any numerical
way. He finds that the best available summary indicator of human well-
12 McGILLIVRAY AND CLARKE

being is how long and happily a person lives. Hicks finds that improving
the human well-being of the poor is best served by equipping these same
people to be agents of their own development. This involves increasing
the effectiveness of social structures, which will require addressing in-
equality across an array of dimensions.
In part II, in terms of applying measures of human well-being,
Baliamoune-Lutz concludes that the HDI and human well-being, when
measured using fuzzy sets, yield different country rankings with signifi-
cantly different levels of well-being for some countries. Thus she finds it
is important to bear in mind that preferences and choices underlying both
objective and subjective indicators of human well-being are vague; and
that such vagueness can have major implications for the outcome of so-
cial and economic policies.
Cherchye and Kuosmanen show that measures of sustainable develop-
ment can be benchmarked and comparative analysis between countries is
possible. McGillivray and Pillarisetti conclude that, depending on the test
statistic under consideration, there is some evidence that the GDI and
GEM are, in an empirical sense, genuinely insightful indicators.
Rojas’s chapter on well-being and the complexity of poverty highlights
that not only are subjective well-being and socio-economic well-being dif-
ferent concepts, but they are not strongly correlated either. He concludes
that subjective well-being indicators are important as they provide new
information, beyond what traditional socio-economic indicators can pro-
vide. In discussing international inequality, McGillivray finds that the
HDI and its components exhibit remarkably similar levels of inequality
among countries but, as expected, much lower inequality than income
per capita.
Clarke concludes that whilst a general increase of well-being based on
the attainment of hierarchical needs is recorded across 8 countries in
South-East Asia over the past 16 years, these improvements are much
less (and often stagnant) than increases in well-being measured by single-
dimension indicators, such as GDP per capita. He argues that policy-
makers must consider hierarchical human needs and motivation when
seeking to improve well-being through economic and social development
activities.
The chapter on modelling poverty and inequality in Australia by Har-
ding et al. found that restoring the social security rate paid to recipient
couples to the same level paid to pensioner couples would reduce overall
poverty in Australia by 0.3 per cent and reduce child poverty by 0.5 per
cent. They suggest that their new model is useful for policy-makers in
order to understand the different characteristics of those in poverty in
different geographic areas.
The breadth of geographical reach makes the results of part III par-
 WELL-BEING CONCEPTS AND MEASURES 13

ticularly interesting. The empirical results of Ivaschenko’s chapter for the

regions of Russia indicate that while male life expectancy responds more
strongly than female life expectancy to economic circumstances, the lat-
ter appears to be more predisposed to the influence of public health
spending. The results support the idea that the (positive) effect of public
health spending on life expectancy is larger for those regions that experi-
ence higher incidences of poverty. The chapter also finds that the finan-
cial crisis which hit Russia at the end of 1998 had a significant negative
effect on longevity independently of the factors directly related to pov-
erty and public health spending.
Grimm finds the effects of educational expansion on the growth of
household incomes, their distribution and poverty in Cote d’Ivoire de-
pend very crucially on the hypothesis made on the evolution of returns
to education and labour demand. For example, if returns to education re-
main constant and the labour market segments, the effects will be very
modest.
In their study of poverty in Ethiopia, Bigsten and Shimeles find that
the percentage of households remaining in poverty was twice as large in
urban areas as in rural areas. This suggests that income variability is a se-
rious problem in rural areas, while persistence is a key feature of urban
poverty. In Bigsten and Shimeles’s second contribution, on the possibility
of pro-poor growth in Africa, they find that the balance between policies
aimed at growth and measures aimed at redistribution should depend on
the elasticity of the growth-equity trade-off.
The topics covered in this book provide a good illustration of the range
of current research on both the conceptualization and the empirical mea-
surement of multidimensional human well-being. It is hoped that these
chapters will stimulate further research along similar lines.

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6 United Nations University, 2006

The views expressed in this publication are those of the authors and do not nec-
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ISBN 92-808-1130-4

Library of Congress Cataloging-in-Publication Data

Understanding human well-being / edited by Mark McGillivray and Matthew

Clarke.
p. cm.
Includes bibliographical references and index.
ISBN 9280811304 (pbk.)
1. Quality of life. 2. Social indicators. 3. Well-being. 4. Poverty. 5. Equality.
I. McGillivray, Mark. II. Clarke, Matthew, Dr.
HN25.U53 2006
306.090 045—dc22 2006028858
Understanding Human Well-being
Edited by Mark McGillivray and Matthew Clarke

Contributors: With more than a billion people living on less than one dollar per
day, human well-being is a core issue for both researchers and
Mark McGillivray policy-makers. The Millennium Development Goals are a powerful
Matthew Clarke reminder of this point. We now know more about human well-being
Caterina Ruggeri and the related concepts of poverty and inequality than ever before,
Laderchi as a result of many conceptual and methodological advances and
Ruhi Saith
better data. Yet despite this, the vitality of underlying concepts and
Frances Stewart
Andrew Sumner the quality of data are repeatedly challenged and there remains
Ruut Veenhoven much to be desired, particularly with regard to the world’s poorest
Douglas A. Hicks countries.
Mina Baliamoune-Lutz
Laurens Cherchye This book examines advances in understanding well-being, poverty,
Timo Kuosmanen and inequality concepts and corresponding empirical applications
J. Ram Pillarisetti and case studies. The authors examine traditional monetary
Mariano Rojas concepts and measurements, and non-monetary factors including
Ann Harding educational achievement, longevity, health, and subjective well-
Rachel Lloyd being.
Anthea Bill
Anthony King Mark McGillivray is a Senior Research Fellow at UNU-WIDER
Oleksiy Ivaschenko in Helsinki and an Inaugural Fellow of the Human Development
Michael Grimm and Capabilities Association. Matthew Clarke is Program Leader,
Arne Bigsten
(International Development) at the School of Global Studies, Social
Abebe Shimeles
Science and Planning, RMIT University, Melbourne.

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